What are you waiting for? Time is money in the stock market. If you are waiting for the stock you have been eyeing for a long time to come to your desired price, you are losing out on returns. Instead of waiting to invest, invest and wait. If you invest and wait, this wait could give you more money to invest when the wait for your desired stock is over. To make your wait worthwhile, use your Tax-Free Savings Account (TFSA) to keep your investment returns tax-free so you have more money to reinvest.
Invest and wait
Suppose you want to buy Nvidia stock, which is soaring like a phoenix in the artificial intelligence (AI) boom. Now is not a good time to buy it. So you wait for the stock to correct. You can use this waiting time to invest in dividend stocks that give you an assured dividend for the next one or two years.
True North Commercial REIT
True North Commercial REIT (TSX: TNT.UN) stock has nose-dived almost 60% after the REIT announced a 50% distribution cut to preserve cash. The REIT saw its occupancy rate fall to 91% in the first quarter from 96% in the year-ago quarter as some tenants vacated the property or reduced leased space to cut costs. The lower occupancy has stressed its dividend payout ratio to over 100%. Halving its distributions will give True North flexibility to absorb lower occupancy and pay mortgages.
The stock is already oversold at $2.56 and has no more downside left. As the stock price dipped (60%) more than its distribution (50%), its yield surpassed 11%. This stock carries risk as the rising interest rate affects its mortgage. For this reason, I won’t recommend it for the long term.
The REIT could sell some of its low-yielding properties to repay loans and reduce the mortgage. But it will continue to pay monthly distributions as it is registered as a trust and enjoys the tax benefits of a trust.
A trust does not pay tax as it distributes rental income or capital gains to its shareholders. True North will distribute its income at $0.02475/share per month. The REIT won’t pay the said amount if it faces losses. In short, your loss is limited to the amount you invest, but your income can grow as the REIT’s income grows.
How to reinvest in the wait-and-invest stock
If you park your $1,000 in True North Commercial REIT, you could earn $29 ($0.02475 x 3 months x 390 shares) in income in three months or around $58 in six months. This amount might look small, but it is better than holding $1,000 in cash in hopes of Nvidia stock falling. If a better investment opportunity comes, you can sell TNT.UN stock and invest more than $1,050 instead of $1,000.
A good entry point for Nvidia is at or below $305. While an extra $50 might not make much difference when buying Nvidia stock, it will when buying BlackBerry (TSX: BB) stock that trades just below $7.
BlackBerry has not yet unleashed its true growth potential as several headwinds have stalled its growth. But growth is coming as a powerful artificial intelligence (AI) tool needs an equally or more powerful AI defence. The AI boom could drive demand for AI-driven cybersecurity. Governments won’t like ChatGPT poking its nose into their servers. BlackBerry’s cybersecurity solutions provide secure endpoint management.
Moreover, the company is building an ecosystem of internet-of-things (IoT) operating systems with QNX software. QNX has gained prominence in automotive and could gradually expand to other applications. BlackBerry stock is a buy-and-hold at a price below $6. The extra $50 you earn from TNT.UN can buy you an additional eight shares of BlackBerry for no extra cost. And if the stock price shoots up by 30%, so will your gains.
Investor takeaway
This investing strategy might sound complex, but the idea is to not keep money idle while you wait for the right opportunity. There are many safe-dividend stocks that are less volatile and keep your invested amount safe while earning dividend income as you wait for your chance at growth. You can check out this list of growth stocks and plan your investment.
